Releases

WASHINGTON--(BUSINESS WIRE)--Aug. 1, 2014--
Graham Holdings Company (NYSE: GHC) today reported income from
continuing operations attributable to common shares of $369.7 million
($49.52 per share) for the second quarter of 2014, compared to $46.6
million ($6.28 per share) for the second quarter of 2013. Net income
attributable to common shares was $750.1 million ($100.48 per share) for
the second quarter ended June 30, 2014, compared to $44.7 million ($6.02
per share) for the second quarter of last year. Net income includes
$380.5 million ($50.96 per share) in income and $2.0 million ($0.26 per
share) in losses from discontinued operations for the second quarter of
2014 and 2013, respectively. (Refer to “Discontinued Operations”
discussion below.)

On June 30, 2014, the Company and Berkshire Hathaway Inc. completed a
previously announced transaction in which Berkshire acquired a
wholly-owned subsidiary of the Company that included, among other
things, WPLG, a Miami-based television station, 2,107 Class A Berkshire
shares and 1,278 Class B Berkshire shares owned by Graham Holdings and
$327.7 million in cash, in exchange for 1,620,190 shares of Graham
Holdings Class B common stock owned by Berkshire Hathaway (Berkshire
exchange transaction). As a result, income from continuing operations
for the second quarter of 2014 includes a $266.7 million gain from the
exchange of the Berkshire Hathaway shares, and income from discontinued
operations for the second quarter of 2014 includes a $375.0 million gain
from the WPLG exchange. Also, income from continuing operations excludes
the operating results of WPLG, which have been reclassified to
discontinued operations, net of tax, for all periods presented.

The results for the second quarter of 2014 and 2013 were affected by a
number of items as described in the following paragraphs. Excluding
these items, income from continuing operations attributable to common
shares was $54.5 million ($7.31 per share) for the second quarter of
2014, compared to $58.7 million ($7.93 per share) for the second quarter
of 2013. (Refer to the Non-GAAP Financial Information schedule at the
end of this release for additional details.)

Items included in the Company’s income from continuing operations for
the second quarter of 2014:

$10.5 million in restructuring charges and software asset write-offs
at the education division (after-tax impact of $6.7 million, or $0.90
per share);

a $7.8 million noncash intangible asset impairment charge at the
education division (after-tax impact of $5.0 million, or $0.67 per
share);

$90.9 million gain from the Classified Ventures’ sale of
apartments.com (after-tax impact of $58.2 million, or $7.80 per share);

$266.7 million gain from the Berkshire exchange transaction (after-tax
impact of $266.7 million, or $35.73 per share); and

Revenue for the second quarter of 2014 was $878.6 million, up 1% from
$870.5 million in the second quarter of 2013. The Company reported
operating income of $94.5 million in the second quarter of 2014,
compared to $96.3 million in the second quarter of 2013. Revenues
increased at the television broadcasting division and in other
businesses, declined at the cable division and were flat at the
education division. Operating results were down in the second quarter of
2014 due to declines at the education division and in other businesses,
offset by improvements at the television broadcasting and cable
divisions.

For the first six months of 2014, the Company reported income from
continuing operations attributable to common shares of $500.7 million
($67.13 per share), compared to $68.3 million ($9.21 per share) for the
first six months of 2013. Net income attributable to common shares was
$882.2 million ($118.26 per share) for the first six months of 2013,
compared to $49.4 million ($6.66 per share) for the same period of 2013.
Net income includes $381.5 million ($51.13 per share) in income and
$18.9 million ($2.55 per share) in losses from discontinued operations
for the first six months of 2014 and 2013, respectively. (Refer to
“Discontinued Operations” discussion below.)

The results for the first six months of 2014 and 2013 were affected by a
number of significant items as described in the following paragraphs.
Excluding these items, income from continuing operations attributable to
common shares was $103.4 million ($13.74 per share) for the first six
months of 2014, compared to $89.4 million ($12.12 per share) for the
first six months of 2013. (Refer to the Non-GAAP Financial Information
schedule at the end of this release for additional details.)

Items included in the Company’s income from continuing operations for
the first six months of 2014:

$15.0 million in early retirement program expense, restructuring
charges and software asset write-offs at the education division and
the corporate office (after-tax impact of $9.6 million, or $1.29 per
share);

a $7.8 million noncash intangible asset impairment charge at the
education division (after-tax impact of $5.0 million, or $0.67 per
share);

$90.9 million gain from the Classified Ventures’ sale of
apartments.com (after-tax impact of $58.2 million, or $7.80 per share);

$266.7 million gain from the Berkshire exchange transaction (after-tax
impact of $266.7 million, or $35.73 per share);

$127.7 million gain on the sale of the corporate headquarters building
(after-tax impact of $81.8 million, or $11.13 per share); and

Revenue for the first six months of 2014 was $1,719.2 million, up 2%
from $1,691.1 million in the first six months of 2013. Revenues
increased at the television broadcasting division and in other
businesses, while revenues at the education and cable divisions were
flat. The Company reported operating income of $174.0 million for the
first six months of 2014, compared to $143.4 million for the first six
months of 2013. Operating results improved at the television
broadcasting and cable divisions, offset by a decline at the education
division and in other businesses.

Division Results

Education

Education division revenue totaled $547.2 million for the second quarter
of 2014, essentially flat compared with revenue of $548.2 million for
the second quarter of 2013. Kaplan reported second quarter 2014
operating income of $10.6 million, compared to $23.7 million in the
second quarter of 2013. Restructuring costs and software asset
write-offs totaled $10.5 million and $4.9 million for the second quarter
of 2014 and 2013, respectively. Operating results for the second quarter
of 2014 also include a $7.8 million intangible asset impairment charge
related to the Kaplan China operations.

For the first six months of 2014, education division revenue totaled
$1,073.4 million, essentially flat compared with revenue of $1,076.0
million for the same period of 2013. Kaplan reported operating income of
$13.1 million for the first six months of 2014, compared to operating
income of $19.7 million for the first six months of 2013. Restructuring
costs and software asset write-offs totaled $10.5 million and $14.3
million for the first six months of 2014 and 2013, respectively.
Operating results for the first six months of 2014 also include a $7.8
million intangible asset impairment charge related to the Kaplan China
operations.

A summary of Kaplan’s operating results for the second quarter and first
six months of 2014 compared to 2013 is as follows:

Three Months Ended

Six Months Ended

June 30

June 30

(in thousands)

2014

2013

% Change

2014

2013

% Change

Revenue

Higher education

$

251,936

$

273,092

(8

)

$

505,715

$

544,952

(7

)

Test preparation

81,098

85,690

(5

)

148,902

154,633

(4

)

Kaplan international

213,262

187,968

13

416,129

372,781

12

Kaplan corporate and other

1,385

1,669

(17

)

3,399

4,273

(20

)

Intersegment elimination

(500

)

(189

)

—

(790

)

(594

)

—

$

547,181

$

548,230

0

$

1,073,355

$

1,076,045

0

Operating Income (Loss)

Higher education

$

20,952

$

22,534

(7

)

$

34,096

$

27,635

23

Test preparation

(3,904

)

7,831

—

(10,532

)

3,486

—

Kaplan international

17,960

6,490

—

28,842

12,887

—

Kaplan corporate and other

(14,602

)

(10,860

)

(34

)

(27,234

)

(19,682

)

(38

)

Amortization of intangible assets

(2,163

)

(2,363

)

8

(4,451

)

(4,881

)

9

Impairment of intangible assets

(7,774

)

—

—

(7,774

)

—

—

Intersegment elimination

92

94

—

136

225

—

$

10,561

$

23,726

(55

)

$

13,083

$

19,670

(33

)

Kaplan Higher Education (KHE) includes Kaplan’s domestic postsecondary
education businesses, made up of fixed-facility colleges and online
postsecondary and career programs. KHE also includes the domestic
professional training and other continuing education businesses.

In 2012, KHE began implementing plans to close or merge 13 ground
campuses, consolidate other facilities and reduce its workforce. The
last two of these campus closures were completed in the second quarter
of 2014. In April 2014, KHE announced plans to close two additional
ground campuses, and in July 2014, KHE announced plans to close an
additional three campuses; KHE will teach out the current students and
the campus closures will be completed by the end of 2015. In July 2014,
KHE also announced plans to further reduce its workforce. In connection
with these and other plans, KHE incurred $2.5 million in restructuring
costs for the second quarter and first six months of 2014 and $2.6
million and $11.6 million in restructuring costs in the second quarter
and first six months of 2013, respectively. For the second quarter of
2014, these costs included severance ($2.0 million), accelerated
depreciation ($0.3 million), lease obligation losses ($0.1 million) and
other items ($0.1 million). For the second quarter of 2013, these costs
included accelerated depreciation ($1.4 million), severance ($0.6
million) and lease obligation losses ($0.6 million). For the first six
months of 2013, these costs included accelerated depreciation ($5.0
million), severance ($1.4 million), lease obligation losses ($4.3
million) and other items ($0.9 million).

In the second quarter and first six months of 2014, KHE revenue declined
8% and 7%, respectively, due largely to declines in average enrollments
that reflect weaker market demand over the past year, lower average
tuition and the impact of closed campuses. KHE operating income declined
in the second quarter due largely to revenue declines, partially offset
by expense reductions associated with lower enrollments and recent
restructuring efforts. KHE operating income increased in the first six
months of 2014 due largely to expense reductions associated with lower
enrollments and recent restructuring efforts, as well as higher
restructuring costs recorded in 2013.

New student enrollments at KHE declined 9% in the second quarter of 2014
due to lower demand across KHE and the impact of closed campuses. New
student enrollments increased 5% for the first six months of 2014 due to
growth at Kaplan University in the first quarter of 2014, offset in part
by declines at KHE campuses.

Total students at June 30, 2014, were down 2% compared to June 30, 2013,
and declined 7% compared to March 31, 2014. Excluding campuses closed or
planned for closure, total students at June 30, 2014, were down 1%
compared to June 30, 2013 and down 7% compared to March 31, 2014. A
summary of student enrollments is as follows:

Excluding Campuses Closing

As of

As of

June 30,

March 31,

June 30,

June 30,

March 31,

June 30,

2014

2014

2013

2014

2014

2013

Kaplan University

44,515

47,109

43,601

44,515

47,109

43,601

Other Campuses

16,508

18,842

18,591

15,221

16,997

16,623

61,023

65,951

62,192

59,736

64,106

60,224

Kaplan University and Other Campuses enrollments at June 30, 2014 and
2013, by degree and certificate programs, are as follows:

As of June 30

2014

2013

Certificate

21.1

%

21.7

%

Associate’s

30.2

%

30.5

%

Bachelor’s

32.2

%

33.1

%

Master’s

16.5

%

14.7

%

100.0

%

100.0

%

Kaplan Test Preparation (KTP) includes Kaplan’s standardized test
preparation programs. KTP revenue declined 5% and 4% for the second
quarter and first six months of 2014, respectively. Enrollment increased
3% and 2% for the second quarter and first six months of 2014,
respectively, due to growth in health and bar review programs, offset by
declines in graduate and pre-college programs. KTP recorded a $7.7
million software asset write-off in the second quarter of 2014 as a
decision was made to consolidate certain learning management systems.
KTP operating results declined in the first six months of 2014 due to
this software asset write-off and an increase in program length for MCAT
courses that extends revenue recognition periods.

Kaplan International includes English-language programs and
postsecondary education and professional training businesses largely
outside the United States. Kaplan International revenue increased 13%
and 12% in the second quarter and first six months of 2014,
respectively, due to enrollment growth in the pathways programs,
English-language and Singapore higher education programs. Kaplan
International operating income improved in the second quarter and first
six months of 2014 due to improved earnings in the pathways and
English-language programs, as well as improved results from operations
in Australia. In the second quarter and first six months of 2013,
restructuring costs in Australia totaled $2.3 million and $2.6 million,
respectively, largely made up of severance costs.

Kaplan corporate represents unallocated expenses of Kaplan, Inc.’s
corporate office, other minor businesses and certain shared activities.
Corporate expense increased in the first six months of 2014 due to
higher compensation expense and costs associated with new business
development activities.

Kaplan continues to evaluate its cost structure and will likely develop
additional restructuring plans in 2014 and incur additional costs.

Cable

Cable division revenue declined 2% in the second quarter of 2014 to
$200.8 million, from $204.6 million for the second quarter of 2013, due
to 4% fewer customers and 7% fewer Primary Service Units (PSUs). For the
first six months of 2014, revenue of $404.8 million was flat with the
prior year. Operating expenses in the second quarter declined 4%, from
$159.8 million to $154.0 million due to fewer customers and
significantly reduced programming costs. Operating expenses declined 2%
in the first six months of 2014 to $316.8 million. Cable division
operating income grew 5% in the second quarter of 2014 to $46.8 million,
from $44.7 million in the second quarter of 2013; for the first six
months of 2014, operating income increased 8% to $87.9 million, from
$81.3 million in the first six months of 2013.

The cable division continues its focus on higher value and higher margin
lines of business and customers, in particular high-speed data
(subscribers up 4% over the second quarter of last year). Also, business
sales comprised 8.9% of total revenue for the first six months of 2014,
compared with 7.5% of total revenue for the first six months of 2013.
Due to rapidly rising programming costs and shrinking margins, video
sales now have less value and emphasis (subscribers down 15% over the
second quarter of last year) and programming costs have been reduced
significantly. Effective April 1, 2014, the cable division elected not
to renew its contract for 15 Viacom networks for a six-year term.

A summary of PSUs and total customers is as follows:

As of June 30

2014

2013

Video

490,309

575,762

High-speed data

482,725

464,292

Telephony

168,695

185,380

Total Primary Service Units (PSUs)

1,141,729

1,225,434

Total Customers

698,699

725,525

In July 2014, the cable division sold wireless spectrum licenses for
approximately $99 million; an estimated pre-tax gain of $75 million will
be reported in the third quarter of 2014 in connection with these sales.
The licenses had been purchased in the 2006 AWS Auction.

Television Broadcasting

Revenue at the television broadcasting division increased 10% to $88.3
million in the second quarter of 2014, from $80.2 million in the same
period of 2013; operating income for the second quarter of 2014 was up
12% to $44.1 million, from $39.2 million in the same period of 2013. The
increase in revenue and operating income in the second quarter of 2014
is due to a $3.8 million increase in political advertising revenue and
$4.6 million in increased retransmission revenues.

For the first six months of 2014, revenue increased 17% to $173.9
million, from $149.1 million in the same period of 2013; operating
income for the first six months of 2014 increased 29% to $88.5 million,
from $68.3 million in the same period of 2013. The increase in revenue
and operating income is due to a $6.9 million increase in political
advertising revenue, $9.5 million in incremental winter Olympics-related
advertising revenue at the Company’s NBC affiliates and $9.3 million in
increased retransmission revenues.

As discussed above, the television broadcasting operating results
exclude WPLG, the Company’s Miami-based television station, which has
been reclassified to discontinued operations for all periods presented.

Other Businesses

Other businesses includes the operating results of The Slate Group and
Foreign Policy Group, which publish online and print magazines and
websites; SocialCode, a marketing solutions provider helping companies
with marketing on social-media platforms; Celtic Healthcare, a provider
of home health and hospice services; Forney, a global supplier of
products and systems that control and monitor combustion processes in
electric utility and industrial applications, acquired by the Company in
August 2013; and Trove, a digital innovation team that builds products
and technologies in the news space.

In April 2014, Celtic Healthcare acquired the assets of VNA-TIP
Healthcare of Bridgeton, MO. This acquisition has expanded Celtic's home
health and hospice service areas from Pennsylvania and Maryland to the
Missouri and Illinois regions. The operating results of VNA-TIP are
included in Other Businesses from the date of acquisition in the second
quarter of 2014.

On May 30, 2014, the Company acquired Joyce/Dayton Corp., a Dayton,
OH-based manufacturer of screw jacks and other linear motion systems.
The operating results of Joyce/Dayton are included in Other Businesses
from the date of acquisition in the second quarter of 2014.

On July 3, 2014, the Company acquired a majority interest in Residential
Healthcare Group, Inc. (Residential), the parent company of Residential
Home Health and Residential Hospice, leading providers of skilled home
health care and hospice services in Michigan and Illinois. The operating
results of Residential will be included in Other Businesses from the
date of acquisition in the third quarter of 2014.

Corporate Office

Corporate office includes the expenses of the Company’s corporate
office, the pension credit for the Company’s traditional defined benefit
plan and certain continuing obligations related to prior business
dispositions. In the first quarter of 2014, the corporate office
implemented a Separation Incentive Program that resulted in early
retirement program expense of $4.5 million, which will be funded from
the assets of the Company’s pension plan. Excluding early retirement
program expense, the total pension credit for the Company’s traditional
defined benefit plan was $45.4 million and $18.9 million in the first
six months of 2014 and 2013, respectively.

Excluding the pension credit, corporate office expenses increased in the
first six months of 2014 due primarily to higher compensation costs and
expenses related to certain acquisitions.

Near the end of June 2014, the Company offered a Voluntary Retirement
Incentive Plan (VRIP) to certain corporate office employees. The VRIP
acceptance period ends in August, and the expense of the VRIP will be
recognized in the third quarter of 2014.

Equity in Earnings (Losses) of Affiliates

The Company holds a 16.5% interest in Classified Ventures, LLC and
interests in several other affiliates.

The Company’s equity in earnings of affiliates, net, was $91.5 million
for the second quarter of 2014, compared to $3.9 million for the second
quarter of 2013. For the first six months of 2014, the Company’s equity
in earnings of affiliates, net, totaled $95.6 million, compared to $7.3
million for the same period of 2013.

The 2014 results include the pre-tax gain of $90.9 million from
Classified Ventures’ sale of apartments.com in the second quarter of
2014.

Other Non-Operating Income (Expense)

The Company recorded total other non-operating income, net, of $268.1
million for the second quarter of 2014, compared to expense of $12.9
million for the second quarter of 2013. The second quarter 2014
non-operating income, net, included a pre-tax gain of $266.7 million in
connection with the Company’s exchange of Berkshire shares. Second
quarter 2014 non-operating income, net, also included $2.9 million in
unrealized foreign currency gains and other items. The second quarter
2013 non-operating expense, net, included $12.6 million in unrealized
foreign currency losses and other items.

The Company recorded non-operating income, net, of $401.4 million for
the first six months of 2014, compared to other non-operating expense,
net, of $16.9 million for the same period of the prior year. The 2014
amounts included the pre-tax gain of $266.7 million in connection with
the Company's exchange of Berkshire shares, a pre-tax gain of $127.7
million on the sale of the headquarters building, $7.9 million in
unrealized foreign currency gains and other items. The 2013
non-operating income, net, included $17.2 million in unrealized foreign
currency losses and other items.

Net Interest Expense

The Company incurred net interest expense of $7.9 million and $16.1
million for the second quarter and first six months of 2014,
respectively, compared to $8.5 million and $17.0 million for the same
periods of 2013. At June 30, 2014, the Company had $451.9 million in
borrowings outstanding at an average interest rate of 7.0%.

Provision for Income Taxes

The effective tax rate for income from continuing operations for the
first six months of 2014 was 23.5%, compared to 40.7% for the first six
months of 2013. The lower effective tax rate in 2014 relates to the
Berkshire exchange transaction. The pre-tax gain of $266.7 million
related to the disposition of the Berkshire shares was not subject to
income tax as the exchange transaction qualifies as a tax-free
distribution. The higher effective tax rate in 2013 resulted mostly from
losses in Australia for which no tax benefit was recorded.

Discontinued Operations

On June 30, 2014, the Company and Berkshire Hathaway Inc. completed the
Berkshire exchange transaction discussed above. A gain of $375.0 million
was recorded in discontinued operations in connection with the
disposition of WPLG, a Miami-based television station. This gain is not
subject to income tax. Also as a result of the exchange transaction,
income from continuing operations excludes WPLG, which has been
reclassified to discontinued operations, net of tax, for all periods
presented.

Earnings (Loss) Per Share

The calculation of diluted earnings per share for the second quarter and
first six months of 2014 was based on 7,363,492 and 7,361,441 weighted
average shares outstanding, respectively, compared to 7,283,116 and
7,276,421 for the second quarter and first six months of 2013. At
June 30, 2014, there were 5,792,628 shares outstanding after the Company
acquired 1,620,190 shares in the Berkshire exchange transaction. The
Company had remaining authorization from the Board of Directors to
purchase up to 159,219 shares of Class B common stock. The earnings per
share computations for the second quarter and first six months of 2014
are largely unaffected by the common shares repurchased as part of the
Berkshire exchange transaction, as the transaction closed on June 30,
2014.

Forward-Looking Statements

This report contains certain forward-looking statements that are based
largely on the Company’s current expectations. Forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results and achievements to differ materially from those
expressed in the forward-looking statements. For more information about
these forward-looking statements and related risks, please refer to the
section titled “Forward-Looking Statements” in Part I of the Company’s
Annual Report on Form 10-K.

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

June 30,

%

(in thousands, except per share amounts)

2014

2013

Change

Operating revenues

$

878,628

$

870,504

1

Operating expenses

720,993

714,011

1

Depreciation of property, plant and equipment

52,017

56,879

(9

)

Amortization of intangible assets

3,360

3,313

1

Impairment of intangible assets

7,774

—

—

Operating income

94,484

96,301

(2

)

Equity in earnings of affiliates, net

91,503

3,868

—

Interest income

641

522

23

Interest expense

(8,557

)

(9,048

)

(5

)

Other income (expense), net

268,114

(12,858

)

—

Income from continuing operations before income taxes

446,185

78,785

—

Provision for income taxes

76,800

31,700

—

Income from continuing operations

369,385

47,085

—

Income (loss) from discontinued operations, net of tax

380,465

(1,951

)

—

Net income

749,850

45,134

—

Net loss (income) attributable to noncontrolling interests

499

(253

)

—

Net income attributable to Graham Holdings Company

750,349

44,881

—

Redeemable preferred stock dividends

(212

)

(206

)

3

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

750,137

$

44,675

—

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

369,672

$

46,626

—

Income (loss) from discontinued operations, net of tax

380,465

(1,951

)

—

Net income

$

750,137

$

44,675

—

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

49.68

$

6.28

—

Basic income (loss) per common share from discontinued operations

51.12

(0.26

)

—

Basic net income per common share

$

100.80

$

6.02

—

Basic average number of common shares outstanding

7,284

7,229

Diluted income per common share from continuing operations

$

49.52

$

6.28

—

Diluted income (loss) per common share from discontinued operations

50.96

(0.26

)

—

Diluted net income per common share

$

100.48

$

6.02

—

Diluted average number of common shares outstanding

7,363

7,283

GRAHAM HOLDINGS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Six Months Ended

June 30

%

(in thousands, except per share amounts)

2014

2013

Change

Operating revenues

$

1,719,189

$

1,691,096

2

Operating expenses

1,425,699

1,424,780

0

Depreciation of property, plant and equipment

105,262

115,838

(9

)

Amortization of intangible assets

6,441

7,030

(8

)

Impairment of intangible assets

7,774

—

—

Operating income

174,013

143,448

21

Equity in earnings of affiliates, net

95,555

7,286

—

Interest income

1,240

1,032

20

Interest expense

(17,377

)

(18,008

)

(4

)

Other income (expense), net

401,387

(16,941

)

—

Income from continuing operations before income taxes

654,818

116,817

—

Provision for income taxes

154,200

47,500

—

Income from continuing operations

500,618

69,317

—

Income (loss) from discontinued operations, net of tax

381,537

(18,924

)

—

Net income

882,155

50,393

—

Net loss (income) attributable to noncontrolling interests

718

(350

)

—

Net income attributable to Graham Holdings Company

882,873

50,043

—

Redeemable preferred stock dividends

(638

)

(650

)

(2

)

Net Income Attributable to Graham Holdings Company Common
Stockholders

$

882,235

$

49,393

—

Amounts Attributable to Graham Holdings Company Common
Stockholders

Income from continuing operations

$

500,698

$

68,317

—

Income (loss) from discontinued operations, net of tax

381,537

(18,924

)

—

Net income

$

882,235

$

49,393

—

Per Share Information Attributable to Graham Holdings Company
Common Stockholders

Basic income per common share from continuing operations

$

67.35

$

9.21

—

Basic income (loss) per common share from discontinued operations

51.30

(2.55

)

—

Basic net income per common share

$

118.65

$

6.66

—

Basic average number of common shares outstanding

7,280

7,228

Diluted income per common share from continuing operations

$

67.13

$

9.21

—

Diluted income (loss) per common share from discontinued operations

51.13

(2.55

)

—

Diluted net income per common share

$

118.26

$

6.66

—

Diluted average number of common shares outstanding

7,361

7,276

GRAHAM HOLDINGS COMPANY

BUSINESS SEGMENT INFORMATION

(Unaudited)

Three Months Ended

Six Months Ended

June 30

%

June 30

%

(in thousands)

2014

2013

Change

2014

2013

Change

Operating Revenues

Education

$

547,181

$

548,230

0

$

1,073,355

$

1,076,045

0

Cable

200,829

204,550

(2

)

404,750

404,688

0

Television broadcasting

88,297

80,228

10

173,948

149,130

17

Other businesses

42,351

37,572

13

67,264

61,386

10

Corporate office

—

—

—

—

—

—

Intersegment elimination

(30

)

(76

)

—

(128

)

(153

)

—

$

878,628

$

870,504

1

$

1,719,189

$

1,691,096

2

Operating Expenses

Education

$

536,620

$

524,504

2

$

1,060,272

$

1,056,375

0

Cable

154,049

159,840

(4

)

316,808

323,365

(2

)

Television broadcasting

44,209

40,993

8

85,474

80,784

6

Other businesses

49,346

43,540

13

85,006

75,896

12

Corporate office

(50

)

5,402

—

(2,256

)

11,381

—

Intersegment elimination

(30

)

(76

)

—

(128

)

(153

)

—

$

784,144

$

774,203

1

$

1,545,176

$

1,547,648

0

Operating Income (Loss)

Education

$

10,561

$

23,726

(55

)

$

13,083

$

19,670

(33

)

Cable

46,780

44,710

5

87,942

81,323

8

Television broadcasting

44,088

39,235

12

88,474

68,346

29

Other businesses

(6,995

)

(5,968

)

(17

)

(17,742

)

(14,510

)

(22

)

Corporate office

50

(5,402

)

—

2,256

(11,381

)

—

$

94,484

$

96,301

(2

)

$

174,013

$

143,448

21

Depreciation

Education

$

15,400

$

20,064

(23

)

$

31,844

$

42,652

(25

)

Cable

33,788

33,964

(1

)

67,575

67,697

0

Television broadcasting

2,039

2,214

(8

)

4,033

4,423

(9

)

Other businesses

780

577

35

1,300

1,006

29

Corporate office

10

60

(83

)

510

60

—

$

52,017

$

56,879

(9

)

$

105,262

$

115,838

(9

)

Amortization and Impairment of Intangible Assets

Education

$

9,937

$

2,363

—

$

12,225

$

4,881

—

Cable

59

57

4

94

107

(12

)

Television broadcasting

—

—

—

—

—

—

Other businesses

1,138

893

27

1,896

2,042

(7

)

Corporate office

—

—

—

—

—

—

$

11,134

$

3,313

—

$

14,215

$

7,030

—

Pension Expense (Credit)

Education

$

3,566

$

4,231

(16

)

$

7,709

$

8,337

(8

)

Cable

888

913

(3

)

1,752

1,795

(2

)

Television broadcasting

358

1,250

(71

)

678

2,594

(74

)

Other businesses

202

134

51

366

250

46

Corporate office

(22,933

)

(9,129

)

—

(40,612

)

(18,250

)

—

$

(17,919

)

$

(2,601

)

—

$

(30,107

)

$

(5,274

)

—

GRAHAM HOLDINGS COMPANY

EDUCATION DIVISION INFORMATION

(Unaudited)

Three Months Ended

Six Months Ended

June 30

%

June 30

%

(in thousands)

2014

2013

Change

2014

2013

Change

Operating Revenues

Higher education

$

251,936

$

273,092

(8

)

$

505,715

$

544,952

(7

)

Test preparation

81,098

85,690

(5

)

148,902

154,633

(4

)

Kaplan international

213,262

187,968

13

416,129

372,781

12

Kaplan corporate and other

1,385

1,669

(17

)

3,399

4,273

(20

)

Intersegment elimination

(500

)

(189

)

—

(790

)

(594

)

—

$

547,181

$

548,230

0

$

1,073,355

$

1,076,045

0

Operating Expenses

Higher education

$

230,984

$

250,558

(8

)

$

471,619

$

517,317

(9

)

Test preparation

85,002

77,859

9

159,434

151,147

5

Kaplan international

195,302

181,478

8

387,287

359,894

8

Kaplan corporate and other

15,987

12,529

28

30,633

23,955

28

Amortization of intangible assets

2,163

2,363

(8

)

4,451

4,881

(9

)

Impairment of intangible assets

7,774

—

—

7,774

—

—

Intersegment elimination

(592

)

(283

)

—

(926

)

(819

)

—

$

536,620

$

524,504

2

$

1,060,272

$

1,056,375

0

Operating Income (Loss)

Higher education

$

20,952

$

22,534

(7

)

$

34,096

$

27,635

23

Test preparation

(3,904

)

7,831

—

(10,532

)

3,486

—

Kaplan international

17,960

6,490

—

28,842

12,887

—

Kaplan corporate and other

(14,602

)

(10,860

)

(34

)

(27,234

)

(19,682

)

(38

)

Amortization of intangible assets

(2,163

)

(2,363

)

8

(4,451

)

(4,881

)

9

Impairment of intangible assets

(7,774

)

—

—

(7,774

)

—

—

Intersegment elimination

92

94

—

136

225

—

$

10,561

$

23,726

(55

)

$

13,083

$

19,670

(33

)

Depreciation

Higher education

$

7,080

$

10,741

(34

)

$

14,820

$

24,180

(39

)

Test preparation

3,072

4,866

(37

)

6,856

9,624

(29

)

Kaplan international

4,944

4,116

20

9,652

8,112

19

Kaplan corporate and other

304

341

(11

)

516

736

(30

)

$

15,400

$

20,064

(23

)

$

31,844

$

42,652

(25

)

Pension Expense

Higher education

$

2,629

$

2,807

(6

)

$

5,257

$

5,614

(6

)

Test preparation

722

641

13

1,444

1,281

13

Kaplan international

89

87

2

178

174

2

Kaplan corporate and other

126

696

(82

)

830

1,268

(35

)

$

3,566

$

4,231

(16

)

$

7,709

$

8,337

(8

)

NON-GAAP FINANCIAL INFORMATIONGRAHAM HOLDINGS COMPANY(Unaudited)

In addition to the results reported in accordance with accounting
principles generally accepted in the United States (GAAP) included in
this press release, the Company has provided information regarding
income from continuing operations, excluding certain items described
below, reconciled to the most directly comparable GAAP measures.
Management believes these non-GAAP measures, when read in conjunction
with the Company‘s GAAP financials, provide useful information to
investors by offering:

the ability to make meaningful period-to-period comparisons of the
Company’s ongoing results;

the ability to identify trends in the Company’s underlying business;
and

a better understanding of how management plans and measures the
Company’s underlying business.

Income from continuing operations, excluding certain items, should not
be considered substitutes or alternatives to computations calculated in
accordance with and required by GAAP. These non-GAAP financial measures
should be read only in conjunction with financial information presented
on a GAAP basis.

The following table reconciles the non-GAAP financial measures to the
most directly comparable GAAP measures:

Three Months Ended

Six Months Ended

June 30,

June 30

(in thousands, except per share amounts)

2014

2013

2014

2013

Amounts attributable to Graham Holdings Company common
stockholders

Income from continuing operations, as reported

$

369,672

$

46,626

$

500,698

$

68,317

Adjustments:

Early retirement, restructuring charges and software asset write-offs

6,725

3,949

9,603

10,090

Intangible asset impairment charge

4,983

—

4,983

—

Classified Ventures sale of apartments.com

(58,242

)

—

(58,242

)

—

Gain from exchange of Berkshire shares

(266,733

)

—

(266,733

)

—

Sale of headquarters building

—

—

(81,836

)

—

Foreign currency (gain) loss

(1,865

)

8,078

(5,093

)

11,031

Income from continuing operations, adjusted (non-GAAP)

$

54,540

$

58,653

$

103,380

$

89,438

Per share information attributable to Graham Holdings Company
common stockholders

Diluted income per common share from continuing operations, as
reported

$

49.52

$

6.28

$

67.13

$

9.21

Adjustments:

Early retirement, restructuring charges and software asset write-offs

0.90

0.54

1.29

1.39

Intangible asset impairment charge

0.67

—

0.67

—

Classified Ventures sale of apartments.com

(7.80

)

—

(7.80

)

—

Gain from exchange of Berkshire shares

(35.73

)

—

(35.73

)

—

Sale of headquarters building

—

—

(11.13

)

—

Foreign currency (gain) loss

(0.25

)

1.11

(0.69

)

1.52

Diluted income per common share from continuing operations, adjusted
(non-GAAP)

$

7.31

$

7.93

$

13.74

$

12.12

The adjusted diluted per share amounts may not compute due to
rounding.